Maxxim Med Inc v. Michelson

• Court: Court of Appeals for the Fifth Circuit
• Decided: January 24, 2004
• Docket: 99-20295
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-20295

MAXXIM MEDICAL, INC.,

Plaintiff-Appellee,

versus

MARX MICHELSON,

Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas (H-99-0460)

June 4, 1999

Before WIENER, DeMOSS, and PARKER, Circuit Judges.

PER CURIAM:*

Plaintiff-Appellee Maxxim Medical, Inc. (“Maxxim”) sued its

former employee, Defendant-Appellant Mark Michelson, in federal

district court in California and in state court in Fort Bend

County, Texas, seeking an injunction to prohibit him from working

for a competitor. Maxxim grounded its complaint in a non-

competition confidentiality agreement contained in a stock option

contract. Michelson removed the Texas suit to the district court

for the Southern District of Texas which, after determining the

applicability of California law to the non-competition agreement,

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. found that it violated California law prohibiting such agreements.

Nevertheless, the court crafted an injunction prohibiting Michelson

“for one year from his resignation date from working for a direct

competitor of Maxxim in any of the product lines he was associated

with at Maxxim during the last two years” he worked there. The

district court based its decision on an Erie guess that, if faced

with the question, the courts of California would adopt the

“inevitable disclosure” theory of trade secrets law1 and that

Michelson’s employment by a competitor of Maxxim would inevitably

lead to disclosure of trade secrets. We granted Michelson’s motion

for an expedited appeal of the district court’s injunction.

I. Appellate Jurisdiction

As a general rule, we do not have jurisdiction to review

interlocutory orders. Under 28 U.S.C. § 1292(a)(1), however, the

grant of a temporary injunction is an appealable interlocutory

order. Moreover, under the collateral order doctrine, an

interlocutory order is immediately appealable if it “(1)

conclusively determine[s] the disputed question, (2) resolve[s] an

important issue completely separate from the merits of the action,

and (3) [is] effectively unreviewable on appeal from final

judgment.”2

The parties do not dispute our jurisdiction to review the

district court’s grant of the temporary injunction, but do dispute

1 See PepsiCo v. Redmond, 54 F.3d 1262 (7th Cir. 1995). 2 Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978).

2 whether we have pendent jurisdiction to review that court’s

interlocutory orders regarding, inter alia, personal jurisdiction.

Michelson cites Magnolia Marine Transportation Company v. LaPlace

Coin Corporation3 for the proposition that we do have such pendent

jurisdiction because § 1292(i) grants subject matter jurisdiction

over issues that “establish the basis” for the grant of a

preliminary injunction. He also contends that we have jurisdiction

over these orders by virtue of the collateral order doctrine.

Maxxim argues in response that Michelson’s reliance on

Magnolia Marine is misplaced, as the jurisdictional standard

articulated in that case has been replaced by the one set forth in

Swint v. Chambers County Commissioners.4 Following the court’s

decision in Swint, we noted, in Thornton v. General Motors Corp.,5

that “pendent appellate jurisdiction is only proper in rare and

unique circumstances where a final appealable order is

`inextricably intertwined’ with an unappealable order or where

review of the unappealable order is necessary to ensure meaningful

review of the appealable order.”6

Maxxim advances that the district court’s personal

jurisdiction and other interlocutory rulings are not inextricably

intertwined —— as, for example, would be an injunction against

3 964 F.2d 1571, 1580 (5th Cir. 1992). 4 514 U.S. 35 (1995). 5 136 F.3d 450 (5th Cir. 1998). 6 Id. at 453-54.

3 proceeding in a court under motion to transfer venue to that court7

—— and that review of those orders is not necessary to ensure

meaningful review of the injunction order. Maxxim also contends

that none of the other orders satisfies the requisites of the

collateral order doctrine.8

Although we recognize that, as a general rule, jurisdictional

determinations by the district court are not immediately appealable

as collateral orders or otherwise, there are exceptions. As noted

above, we recognized that proposition recently in Thornton. We

conclude that the instant case —— linking a clearly appealable

interlocutory order granting a preliminary injunction with the

question of the court’s ruling that it had jurisdiction in personam

over the person sought to be enjoined —— presents such an

exception. As issued, the injunction in this case has the very

real effect of prohibiting Michelson from pursuing his livelihood.

Even if the compensation that he does not receive during the

efficacy of the injunction (plus interest and damages as well)

could be reimbursed by Maxxim and thus not be deemed irreparable

injury, the same cannot be said of other effects of the injunction:

7 Maryland v. Atlantic Aviation Corp., 361 F.2d 873 (3rd Cir. 1966). 8 See Van Cauwenberghe v. Bierd, 486 U.S. 517, 527 (1988) (“the denial of a claim of lack of jurisdiction is not an immediately appealable collateral order”); Rein v. Socialist Peoples’ Libyan Arab Jamahariya, 162 F.3d 748, 756 (2d Cir. 1998) (“denials of motions to dismiss for jurisdictional reasons cannot ordinarily be the subject of interlocutory appeals”); Louisiana Ice Cream Distribs. v. Carvel Corp., 821 F.2d 1031, 1033 (5th Cir. 1987) (holding orders regarding venue and transfer are not immediately appealable).

4 The company for whom Michelson went to work following resignation

from Maxxim will not necessarily hold open that or any position for

Michelson; and the injurious effects to Michelson and his family

from the abrupt interruption of his stream of earned income are

such that virtually no amount of money could repair them. We are

satisfied that, under the particular facts of this case, the issue

of personal jurisdiction is so “inextricably intertwined” with the

granting of the injunction, and that ordinary channels of appellate

review would be so ineffectual, that even under Swint and Thornton,

we have —— and must exercise —— appellate jurisdiction to review

the district court’s determination that it had personal

jurisdiction over Michelson.9

II. Personal Jurisdiction

A federal district court sitting in diversity may exercise

personal jurisdiction over a nonresident defendant if (1) the

long-arm statute of the forum state confers personal jurisdiction

over that defendant; and (2) exercise of such jurisdiction by the

forum state is consistent with due process under the United States

9 See Burlington Indus. v. Maples Indus., 97 F.3d 1100, 1101 (8th Cir. 1996) (holding in trade secret misappropriation case that court had appellate pendent jurisdiction to review personal jurisdiction determination underlying appealable preliminary injunction order); see also NationsBank Corp. v. Herman, No. 98- 1127, 1999 WL 187239, at * 2-3 (4th Cir. Apr. 6, 1999) (holding court had appellate pendent jurisdiction over denial of motion for summary judgment based on plaintiff’s alleged failure to exhaust administrative remedies because “if [plaintiff] must exhaust . . ., the preliminary injunction was improper.”); Thornton, 136 F.3d at 453-454 (holding court had appellate pendent jurisdiction to review attorney’s fees sanction because it was “inextricably intertwined” with immediately appealable suspension sanction).

5 Constitution.10 In the present case, because Texas long-arm

statute10 extends to the limits of federal due process, these two

steps collapse into one.11

The Due Process Clause of the Fourteenth Amendment permits the

exercise of personal jurisdiction over a nonresident defendant when

(1) that defendant has purposefully availed himself of the benefits

and protections of the forum state by establishing "minimum

contacts" with the forum state; and (2) the exercise of

jurisdiction over that defendant does not offend “traditional

notions of fair play and substantial justice.”12 The defendant,

through his conduct and connection with the forum state, should

reasonably anticipate being haled into court in the forum state.13

As Maxxim alleges its suit arises from or relates to the

defendant’s contact with the forum state, we are concerned with

“specific jurisdiction.”14 Although a single act by the defendant

directed at the forum state can be enough to confer personal

10 See, e.g., Ham, 4 F.3d at 415; Irving v. Owens-Corning Fiberglas Corp., 864 F.2d 383, 385 (5th Cir. 1989). 10 Tex. Civ. Prac. & Rem. Code §§ 17.041-045 (Vernon 1986). 11 Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990); Ham, 4 F.3d at 415 & n.7. 12 International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). 13 World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297(1980). 14 See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984); Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir. 1987).

6 jurisdiction if that act gives rise to the claim being asserted,15

entering into a contract with an out-of-state party, standing

alone, is not sufficient to establish minimum contacts.16 Rather,

in a breach of contract case, to determine whether a party

purposefully availed himself of a forum, a court must evaluate

“prior negotiations and contemplated future consequences, along

with the terms of the contract and the parties’ actual course of

dealing....”17

In holding that it had personal jurisdiction over Michelson,

the district court relied on the facts that: Michelson (1) entered

into an employment agreement with a Texas-based company while

living in California, (2) signed stock option agreements with a

Texas employer while he was living in California, which agreement

specified application of Texas substantive law but not jurisdiction

or venue, (3) made sales trips to Texas at the behest of employer,

(4) supervised personnel whose territory included but a sliver of

far west Texas —— namely, El Paso, Texas, (5) annually attended

Maxxim’s mandatory national sales training meeting in Texas, (6)

made mandatory visits to Maxxim’s assembly plants in Texas, and (7)

made telephone calls to and from Maxxim’s Texas headquarters.

The district court correctly held that these contacts were not

sufficiently “continuous and systematic” to justify the exercise of

15 Ham, 4 F.3d at 415-16; Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1361 (5th Cir. 1990). 16 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478-79 (1985). 17 Id. at 479.

7 general jurisdiction over Michelson,18 yet concluded —— curiously

—— that they were sufficient to confer specific jurisdiction over

him. As indicated above, to establish that the court has specific

jurisdiction over Michelson, Maxxim must show that Michelson

undertook some activity in, or purposefully directed some act at,

Texas, and that its claims arise out of or relate to those acts.19

Maxxim, however, has failed to demonstrate that any of Michelson’s

alleged contacts has even the slightest nexus with its

unenforceable non-competition claim or its misappropriation of

trade secrets claim. Accordingly, those contacts cannot serve as

the basis for an exercise of specific jurisdiction over Michelson.

As Maxxim can point to no other link between Michelson and Texas

that is related to its claims against him, jurisdiction is not

proper.

III. Conclusion

We conclude that the district court reversibly erred as a

matter of law in deciding that it had personal jurisdiction over

Michelson. As such, the preliminary injunction issued by the court

is a nullity. We therefore reverse the district court, vacate and

dissolve the preliminary injunction issued by that court, and

remand this case to that court with instructions to dismiss

Maxxim’s action, without prejudice for lack of personal

jurisdiction.

18 See Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir. 1990). 19 Felch v. Transportes Lar-Mex SA de CV, 92 F.3d 320, 325 (5th Cir. 1996).

8 REVERSED; PRELIMINARY INJUNCTION VACATED and DISSOLVED; REMANDED

with instructions.